Interest Coverage Ratio Calculator
Calculate Interest Coverage Ratio (ICR) for real estate investments. Measure property's ability to cover interest payments.
How it works
Interest Coverage Ratio = NOI ÷ Annual Interest Expense. Shows how many times property income covers interest payments.
Example
$36,000 NOI ÷ $18,000 interest = 2.0x Interest Coverage.
FAQ
What is a good interest coverage ratio?
Generally, 1.5x or higher is acceptable, with 2.0x+ being strong. Lower ratios indicate higher risk if property income declines.
How is this different from DSCR?
Interest coverage only considers interest payments, while DSCR includes both principal and interest. Interest coverage focuses purely on income vs. interest expense.
Why do lenders care about interest coverage?
It shows the property's ability to service debt interest even if no principal is paid. It's a pure measure of income adequacy for debt service.
Can interest coverage be calculated monthly?
Yes, use monthly NOI divided by monthly interest payment. The ratio will be the same whether calculated monthly or annually.
What if interest coverage is below 1.0?
This means NOI doesn't even cover interest payments, indicating negative cash flow and high financial risk. Consider increasing income or reducing debt.